DealZone

Keeping score: big-ticket M&A drought, bond bonanza

July 31, 2009

Highlights and low points — syndicated loans, for example, at their lowest since 1993 — from the July Thomson Reuters Investment Banking Snapshots:

DEBT CAPITAL MARKETS

Asia Pacific & Chinese Issuers Reached New Corporate Bonds High in July – Asia Pacific issuers raised a record US$41bn in July, up 11% from June 2009 (US$43.3bn) and double the level of July 2008 (US$24.1bn). Chinese issuers accounted for 49% of the regions’ activity with a record US$23.4bn raised, up 3% from June 2009 (US$22.7bn) and up 218% from July 2008 (7.4bn). Financials (US$16.2bn, 70%) and Materials (US$4.7bn, 20%) were the main sectors driving the surge in China.

European High Yield Bonds Hit 2 Year High – Global issuance of high yield bonds reached US$12.3bn in July 2009, down 27% from June 2009 (US$16.7bn) but up 270% from July 2008 (US$3.3bn). This marked the third highest level of activity for a month of July on record and the best since 2003 (US$18.6bn). European issuers accounted for 44% of total with US$5.4bn raised, the highest monthly volume since June 2007. European activity consisted of two issues, Wind Acquisition Finance (US$3.7bn), the second largest HY bond of the year globally and the second largest European bond ever issued after NXP Semiconductor (US$5.95bn, 2006) and Fiat Finance & Trade ($US$1.8bn).

EQUITY CAPITAL MARKETS

Global ECM Up 22% in July as IPO Reached 14 Month High – Global ECM reached US$78.7 billion for the month of July up 22% when compared to the same month last year. Global IPO volumes reached a 14 month high with US$9.2bn, and account for 12% of the total ECM market for July. Global follow-on Issuance reached US$61.3bln for July this year, and accounts for 78% of ECM activity for this month. The largest ECM Issue of July was the US$12.27bln rights issue by Rio Tinto in the UK

BRIC Issuers Raised 26% of Global Equity in July – BRIC ECM accounts for 26% of global ECM issuance for July 2009 this is the largest level of activity for this region in 20 months, BRIC follow-on issuance has also reached an all time monthly high of 36 issues for July. BRIC market IPOs account for 93% of the total IPO activity for this month, which is due to one issue in particular — the China State Construction Engineering IPO worth US$7.3bln

Global ECM Pipeline for 2009 Currently Stands at US$93.9bln – Follow-ons (US$72bn) and IPOs (US$19bn) account for 77% and 20.2% of the pipeline respectively. Emerging market issuers could raise up to US$48.1bln or 51% of the total ECM pipeline.

SYNDICATED LOANS

Monthly Loan Issuance at its Lowest Since 1993 – Global issuance of syndicated loans in July 09 reached US$34.6bln, down 88% from July 08 (US$278bn) and marks the lowest level of monthly activity since October 1993 (US$28.7bn). On the year to date global issuance stands at US$820bn, down 54% from the same period last year (US$1,788bn). European loans issuance reached US$7.7bn in July 09, down 93% from July 08 (US$115bn) whilst US issuance reached US$11.6bn, down 90% from July 08 (US$115bn). The largest loan for July is US2.2bln US Georgia-Pacific Corp issue

MERGERS & ACQUISITIONS

First sub-$100 billion Month for Worldwide M&A since September 2004 -  Worldwide M&A totals $1.1 trillion for year-to-date 2009, a 43% decrease over 2008 levels.  With just $96 billion in announced deals this month, merger activity in July marks the first monthly period since September 2004 with less than $100 billion in volume.

Mid-Market M&A Bolsters July Activity; Shutout for Deals over $5 billion – For the first time in nearly six years, not one worldwide M&A transaction over $5 billion was announced in a monthly period.  Deals under $500 million accounted for 40% of overall activity in July, with 22% of mid-market deals coming from companies in the United States, 12% from deal activity in China and 7% from Japan.

Financials & Energy Power Top Sectors – Comprising 21% of overall activity for the month, financial target M&A was driven by activity in the insurance and banking sectors, while energy and power targets were lifted by activity in the oil & gas space.

Morgan Stanley Leads Worldwide Rankings; JP Morgan leads Mid-Market; Evercore moves into Top 5 in the US

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